Robust Visitation Aid Boyd Gaming (BYD), High Costs Ail

Boyd Gaming Corporation BYD continues to benefit from robust visitation, new property openings and refurbishment of existing properties. Solid contributions from its Online segment also bode well. However, high costs remain a concern.

Growth Drivers

BYD considers the local market in Las Vegas as a major driver for its portfolios. For 2023, it reported positive customer trends with respect to guest counts, frequency and spending along with growth in the convention business. During 2023, Nevada Tourism witnessed approximately 5% uptick in visitation, with Las Vegas experiencing solid growth in visitation, marking a significant rise. The convention business witnessed an impressive 20% growth in 2023.

Average daily room rates have improved by over 12% across the Southern Nevada market during 2023. With upcoming event of Las Vegas’ first Super Bowl, a bustling convention calendar, the recent introduction of Sphere, the opening of new resorts and refurbishment of existing properties and projects worth billions of dollars under development across the Las Vegas Valley, Southern Nevada is poised for sustained market growth.

Boyd Gaming continues to expand its portfolio by strengthening current operations and growing through capital investments as well as other strategic measures. The company extensively depends on acquisitions as a strategy to expand its brand presence.

During fourth-quarter 2023earnings call BYD stated progress regarding the significant expansion exploration of the Wilton Rancheria Tribe property. The property is currently undergoing various expansion possibilities including additional casino space, a hotel tower, and meeting and convention facilities. Although finalization has not yet been made, the company is optimistic about long-term growth potential of this property. Also, management states interest in the expansion and Gold Coast, Blue Chip, Ameristar St. Charles and Valley Forge in 2024.

The Zacks Rank #3 (Hold) company is also benefiting from robust demand for online sports betting. During 2023, adjusted EBITDAR in the Online segment was $62.3 million, reflecting 56.5% growth on a year-over-year basis. For 2024, it expects segmental EBITDAR in the range of $60-$65 million.

Management projects solid contributions from the newly introduced sports betting in Ohio in January 2023. During the second quarter of 2023, it relaunched Starts branded online casinos in Pennsylvania and New Jersey, marking the first leveraging of the Boyd Interactive platform to manage its online casino operations.

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Concerns

Despite several margin-enhancing initiatives, Boyd Gaming has been grappling with higher wages, utilities and property insurance expenses. During 2023, food and beverage, room, online as well as selling, general and administrative expenses increased 4.1%, 7.5%, 67.8% and 4.3% year over year to $240.9 million, $73.5 million, $359 million and $389.9 million, respectively. Total operating costs and expenses during the year were $2.84 billion, up from $2.58 billion reported in the prior-year.

Going forward, BYD intends monitoring the economic situation to gauge the impacts of interest rate hikes and inflationary pressures. Although cost pressures are likely to be moderate going through 2024, they are going to stay for some time as stated by the company.

Key Picks

Some better-ranked stocks in the Zacks Consumer Discretionary sector are as follows:

Trip.com Group Limited TCOM sports a Zacks Rank #1 (Strong Buy). TCOM has a trailing four-quarter earnings surprise of 53.1%, on average. Shares of TCOM have gained 34.4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for TCOM’s 2024 sales and earnings per share (EPS) indicates a rise of 18.2% and 1.8%, respectively, from the year-ago levels.

Royal Caribbean Cruises Ltd. RCL flaunts a Zacks Rank #1. RCL has a trailing four-quarter earnings surprise of 26.4%, on average. Shares of RCL have surged 123.4% in the past year.

The Zacks Consensus Estimate for RCL’s 2024 sales and EPS indicates a rise of 14.7% and 47.9%, respectively, from the year-ago levels.

Hyatt Hotels Corporation H carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 17.8%, on average. Shares of H have increased 46.3% in the past year.

The Zacks Consensus Estimate for H’s 2024 sales and EPS indicates a rise of 3.5% and 25%, respectively, from the year-ago levels.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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